Lodging

I'd recommend my hometown:  Los Osos/Baywood ParkBaywood-Los Osos.  There are 2 lovely bayfront B & B's - Baywood Inn: www.baywoodinn.com,Baywood inn805-528-8888, and Backbay InnBack Bay Inn:  www.backbayinn.com, 805-528-1233.  It's a bit off Hwy 1, take the Los Osos exit just before Morro Bay.  You will think you have discovered Brigadoon.  

There was a question posted on Trippy before that might be helpful about LA to SF. A lot of people seem to recommend the Madonna Inn Resort & Spa as a good place to stay in San Luis Obispo.

For a stop half way and before you enter the wonderful scenic part of Highway One, I would recommend the least expensive cities which would be Morro Bay and San Simeon. Both have good, less expensive places. Morro Bay has more to do and places to eat. There is a Motel 6 in Morro Bay and San Simeon. Of course, you can pay three times as much at other hotels closeby. For upscale, Cambria is wonderful and there are several hotels downtown and along the beach. There is also an IH hostel on Bridge St. In CambrIa. Summer is peak season along this route and booking early is important.

Cambria is a good suggestion, lots of nice modest places along "Moonstone Beach"  We love Shell Beach, just south of San Luis Obisbo.  "Dolphin Bay Resort and Spa" has pet friendly rooms and a great restaurant.  There are other, more modestly price places. Pismo Beach is nearby, also very nice.  Morro Bay would be a good choice too!

Have a great trip!